Making an offer on a home is one of the most exciting and nerve-wracking moments in the homebuying journey. Offer too much, and you overpay — not just now, but for as long as you have a mortgage. Offer too little, and you can lose out to a higher offer and go back to square one.

Striking the perfect balance of how much to offer on a house can make or break your homebuying experience. Here’s what you need to know to answer, “How much should I offer on a house?”

Key Takeaways:

  • Before making an offer, assess local market conditions. An ideal offer in a seller’s market will look different from a reasonable offer in a buyer’s market.
  • You should research the condition of the property and the sales prices of comparable homes, which will be major factors in your offer.
  • What you can afford plays a key role in your offer. 

Understanding the Housing Market

The housing market ebbs and flows over time. Before first-time homebuyers make an offer on a house, it’s important to take the temperature of the market.

Here’s a general breakdown of the types of housing markets you might encounter.

What is a buyer’s market?

As the name suggests, a buyer’s market is the most favorable for buyers. Essentially, there are more homes for sale than people who want to purchase them. With more sellers than buyers in the market, buyers have greater power in the negotiation process.

If you are purchasing a house in a buyer’s market, you’re facing less competition. In some cases, this might mean the seller is willing to accept a lower price.

What is a seller’s market?

A seller’s market occurs when there are more buyers than sellers in the marketplace. With more buyers trying to purchase a smaller number of available homes, the competition pushes up prices, and bidding wars are more likely. 

Generally, sellers enjoy plenty of interest under these market conditions. For buyers, the competition often means the seller isn’t willing to accept an offer below the asking price. 

What is a balanced market?

The final option is a balanced market, which features relatively equal numbers of buyers and sellers. When the market is in balance, buyers and sellers are on similar footing. Homes usually sell at or near the asking price.

Researching the Property

The condition of the market isn’t the only factor to consider when deciding how much to offer. A careful assessment of the property also is a priority.

Here are some details about the property that could affect your offer price. 

How long has the listing been active?

You can find out how long a property has been on the market by looking at its listing history or by asking your real estate agent.

If the property has only been on the market for a few days, the seller might be confident in their asking price. But if the property has been sitting on the market for a while, or the price recently has been reduced, that suggests the seller is asking for too much and might be open to a lower offer.

What is the condition of the property?

The physical condition of the property also will influence your offer amount. Typically, buyers are willing to offer more for a move-in ready home than one that needs repairs or renovations.

Be realistic about how much work a home might require. Do your research to estimate the cost of repairs, and consider that information in your offer amount.

How does the listing price compare to the local market?

It’s helpful to check how the listing price matches up to similar properties in the area. Comparable homes — more commonly known as comps — are nearby homes similar in size, condition, and features that have sold recently. 

“See what they sold for and how long it took for them to sell,” says Pratik Pathapati, owner of the real estate investment company Rework Cash Offers in Sacramento, California. “In some cases, the listing details of these comps will tell you how many offers they received.”

Your real estate agent can perform a competitive market analysis, or look at comps, to see how the list price stacks up. Of course, it’s often difficult to find a recently sold property that exactly matches the home you want to buy. But understanding prices in the area can help you determine what might be a reasonable price for the home.

What are the seller’s motivations?

The reasons why someone is selling their home can have a big effect on your offer price.

Some sellers list the home with an aspirational price. In other words, they ask for a sky-high price just to see what happens. If a seller is looking for someone to make them move, then they’re unlikely to accept an offer below list price.

In contrast, a seller who needs to move — say they’ve accepted a new job out of state — might be more motivated to work out a deal for a lower price that can close quickly.

Knowing Your Budget

Market factors play an important role in your decision, but the key piece of any house offer is your budget. You should know exactly how much you’re willing to spend on a home before making an offer. 

How much can you afford?

It’s important to know how much house you can afford. As a rule of thumb, some suggest you can afford to get a mortgage that’s two to three times your household income. For example, if your household income is $50,000, you might be able to afford a mortgage for between $100,000 and $150,000.

But it’s more effective to take a close look at your budget and determine how much you can comfortably afford to spend on a mortgage payment each month. Using a mortgage calculator is one way to start, and from there, you can work backward to determine how much you can afford to pay monthly and still be able to make a down payment and cover closing costs.

Getting mortgage preapproval

Mortgage preapproval serves two purposes. First, it gives you a chance to find out how much a mortgage lender expects it can lend you. Getting preapproval helps you avoid offering more than you can reasonably finance.

Second, beyond putting guardrails on your offer, preapproval signals that you’re a serious buyer. Many sellers take this factor into consideration when accepting an offer. Someone with preapproval is less likely to run into financing issues that could ruin the deal.

Deciding On an Offer Amount

After gathering all the information surrounding your potential home purchase, it’s time to make an offer on a house. Here’s a breakdown of when it might make sense to offer more or less than the asking price. 

When to offer over the asking price

Paying more than the asking price makes sense in some cases. For example, “when you are in a multiple-offer situation and want your offer to be accepted,” says Lehua Korpacz, a Realtor at Coldwell Banker Island Properties in Koloa, Hawaii. Another reason to offer over asking is “when you really want the property and are not willing to lose it,” she says. In a hot market, making an offer above asking might be your best chance.

The next question to ask is, How much over asking price should I offer? Start by looking at how much over asking prices houses are going for in the area, which should help you map out a good offer. 

As you nail down an offer, consider these tips:

  • Work with your real estate agent. An experienced agent knows the local market and can advise you on a setting a good price point. 
  • Look at the comps. Comparable home sales should give you a good idea of an acceptable offer. 
  • Evaluate your interest. Are you willing to lose your chance to buy the home? If not, you might choose to make a higher offer.
  • Cash matters. An all-cash offer or a large earnest money deposit could sway the seller in your direction. 
  • Keep the appraisal in mind. If you’re getting a mortgage, the lender will require a home appraisal. Unless you’re willing to make up the difference out of pocket, don’t offer more than the home is estimated to appraise for.

When to offer under the asking price

If you are in a buyer’s market, or simply don’t think the list price matches the value of the home, you can choose to make an offer below list price. Technically, there are no rules on how low you can go. But if you want the seller to accept your offer, try to stay reasonable.

Here are some tips to keep in mind:

  • Buyer’s markets give you more power. If you’re shopping in a buyer’s market, you have more power to offer a lower amount or to ask the seller for other concessions. 
  • Look for motivated sellers. Sometimes the listing will include information about the motivation of the seller. If the seller has a pressing reason to leave, you could get away with offering less, especially if you can offer a quick close.
  • Look for houses that need some work. If the home is a fixer-upper that needs extensive repairs or renovations, you could use that as leverage to offer less. 
  • Ask your agent. Work with your real estate agent to determine a reasonable offer. 
  • Be willing to walk away. If you’re willing to wait until the right home comes along at a price you can handle, you have nothing to lose by offering less than the asking price.

When to offer the listing price

In some cases, the list price is the most appropriate price point for the home. You can determine if the price is reasonable, or even a great deal, by looking at the comps.

Here are some tips:

  • Jump on good deals. If a seller lists their home at a reasonable price, offering the list price could lead to a quick acceptance.
  • Ask your agent. Your real estate agent should be able to help you determine a fair price point for the home. If that matches the list price, consider offering that price. 
  • Be competitive. If you’re competing with cash buyers, a full-price offer might sway things your way. 
  • You have less power in a seller’s market. In a seller’s market, you have limited power as the buyer. Consider giving the seller exactly what they asked for to close on a house.

Making a Reasonable Offer

Depending on the situation, a reasonable offer might range from the listing price to 20% below list price. Here’s a breakdown of what that might look like for the home you are considering:

Reasonable vs. Unreasonable House Offers

Listing Price5% Below (Reasonable)10% Below (Reasonable)15% Below (Reasonable)20% Below (Reasonable)25% Below (Unreasonable)40% Below (Unreasonable)

Finalizing Your Offer

You’ve done your homework. Now it’s time to strengthen your house offer to stand out. Beyond the offer amount, you have a few more decisions to make before you and the seller are ready to sign a purchase and sale agreement.

Sweeten the offer

If you’re caught in a bidding war, you can set yourself apart from the crowd. Consider making an offer that waives certain contingencies or includes more earnest money. 

When waiving contingencies, be careful. For example, waiving the home inspection is usually not a good idea because you could get stuck purchasing a home with serious flaws.

Consider an all-cash deal

When you make an all-cash offer, the seller can be sure that the deal won’t fall through due to a financing issue. In a competitive market, cash could make the seller consider your offer more seriously. 

When to walk away

Regardless of the amount you offer, the seller has the opportunity to make a counteroffer. If the seller counters with a number out of your reach, it might be time to back out of buying the home.

FAQ: How Much Should You Offer?

Here are the answers to frequently asked questions about how much to offer on a home.

What is a respectable offer on a home?

As a potential buyer, there’s no rule on how much you have to offer on a home purchase. A respectable offer should be based on market research of comparable home sales. While the list price is a starting point, you are free to make an offer above or below that amount. 

Should I offer $20,000 over asking price?

In a competitive seller’s market, offering $20,000 above asking price might get the seller’s attention. If you’re set on purchasing this home, making a high offer might be your best shot. However, you should only offer what you can comfortably afford.

What percentage is a lowball offer?

Every seller has a different opinion about what is a lowball offer. Generally, offering less than 20% of the list price falls into the lowball category. You have every right to make a lowball offer, but be prepared for a counteroffer.

The Bottom Line on How Much You Should Offer

When you find a home you want to buy, it’s sometimes difficult to put a price on it. You want to make a successful bid, but don’t want to pay more than you have to or more than you can afford. Putting in a lower bid risks your offer being refused or outbid by another buyer. But with some good research, advice from an experienced agent, and careful consideration of what you can afford, you should be able to put together a solid offer that can get you one step closer to owning a home.